A Requiem for Today’s Grid

People speak reverentially about the electricity grid, and rightly so. The U.S.’ electricity grid is an awesome technical, operational, and public policy accomplishment. Who can deny the matchless service it delivers, occasional weather-related breakdowns notwithstanding? In fact, acts of Mother Nature — Hurricane Sandy, say — only highlight its otherwise stellar reliability. And rural electrification, like rural telephony, is a triumph of public policy with foresight.

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The AT&T system and Bell Labs once evoked similar awe. The reliability was wondrous. From any phone in any corner of the U.S., one could reach any other corner of the U.S. Who could quarrel with the perfection that was the Public Switched Telephone Network (PSTN)?

But then the industrial order changed. The Bell Labs of yesterday barely exists today, and the telephone network has metamorphosed in amazing ways during the last twenty years. In July 2014, the new incarnation of AT&T installed their U verse high-speed Internet service at our home, and upgraded the network to Voice over Internet Protocol (VoIP). The Class 5 switch, payphones, and pagers are history.

The electricity grid as we know it today, shall also pass, and a new one will take its place. How do we manage the transition to Electricity 2.0?

As Telephone So Electricity

NY State’s Public Services Commission, in their April 2014 Reforming the Energy Vision (REV) document proposes one new approach. It envisages a new mission for utilities, that of Distributed Services Platform Providers (DSPP). “The DSPP will identify, plan, design, construct, operate, and maintain the needed modifications to existing distribution facilities to allow wide deployment of distributed energy resources.”

From grid-based electricity we are moving toward personal electricity, or home-based electricity. From one-way flow, we are moving toward two-way, transactive electricity flows on mesh networks. Electricians are now service providers of personal solar power plants. The natural monopoly is giving way to numerous electricity providers. In economics terms, the barriers to entry in electricity production have fallen.

Off-grid solar homeowners enter the electricity business and compete with the utility. Such market entry undermines the natural monopoly principle at the heart of the industry structure. The REV document notes, “The introduction of widespread distributed resources can be perceived as challenging the natural monopoly model of utilities.” With the end of natural monopoly, “rate of return” regulations and geographical franchises begin to crumble.

Ease of market entry notwithstanding, the REV proposal continues to value monopoly elements in the interest of reliability. To quote, “The REV vision does not eliminate the natural monopoly of the distribution system operator; rather the locus of the natural monopoly is shifted from sheer physical delivery to management of a complex system of inputs and outputs while maintaining reliability [emphasis added].”

The New Public Interest

With technological advance and easy market entry, what constitutes the new public interest? It doubtless includes:

resiliencyof supply in the face of storms or cyber attacks; and therefore it

fosters new market entry, thereby competition – in renewable generation, in value-added services, and in new business models.

The public interest, however, no longer lies in regulating monopolyinvestments to support low electricity prices; solar affordably price competes with grid power in many markets.

People want green electricity – renewables – in the generation mix. Reliability has to be a given, no matter what the technology, or the topology, or the size of an operation. Microgrids – between off grid homes and the macrogrid – are expected to be more resilient during hurricanes.

Daniel Esty, Connecticut’s Department of Environment and Energy Services states, “our microgrid strategy aims at providing a mechanism at facilities like hospitals, sewage treatment plants and prisons where the power must stay on” and “… keep police and fire stations, a place to charge cellphones, perhaps a school as a warming center, a grocery store, a gas station, a bank and a pharmacy … supported by distributed generation … while the grid is down.”

Microgrids, however, are a work-in-progress. And microgrid-based services are constrained by archaic laws, such as not being able to offer service to customers across a public right of way. Such laws, inconsistent with technological possibilities, are no longer in the public interest.

Laws changed in telecom in response to new business realities. For instance, Competitive Local Exchange Carriers (CLEC) were hosted at telephone company facilities; they used the unbundled “loop,” hitherto exclusive to the Bell system operators, to offer competitive and new services. Could microgrid operators be similarly co-located at a utility’s sub-station, and offer competitive electricity services to a neighborhood?

Beyond green generation, reliability, and resiliency, and given the state of energy technologies, the new public interest preponderantly consists in encouraging new business formation, for innovative start-ups to arise in the energy space; sometimes in association with, occasionally competing with, or at times independent of the existing grid.

Demand Decline, An Existential Crisis

With lowered prices, telephone minutes of use increased; demand was price elastic. The electric utilities, in contrast, face a loss of demand. Energy efficiency programs, demand response, and superior appliances from LED lights to LCD TVs create benefits with lower consumption, and therefore potentially lower utility revenues. Only if electric car charging takes off will there be a temporary reprieve.

If revenues drop, will stock prices and market valuations drop too, as has occurred in Europe? Will solar substitution accelerate if revenues are maintained with price rise? Will analyst recommendations for investor owned utilities change from “Buy” to “Hold” or “Sell”?

The revenue erosion will be slow, say, over fifteen years, given the size of the utilities and their market dominance. Regardless, unless the utilities embrace the new energy paradigm – Distributed Generation (DG), microgrids, and value-added services – they may not maintain revenue levels. The regulators may not support rate increases; the public interest has shifted in favor of competitive new market entry.

New York State’s DSPP Vision: Bold Yet Insufficient

The REV document acknowledges the public interest in incorporating DER — Distributed Energy Resources — into the grid. It states, “DER … include Energy Efficiency (EE), Demand Response (DR), and Distributed Generation (DG).” However, it does not explicitly advocate new market entry as being in the larger public interest. Rather, it appears to hand over the management control of the DER and microgrids to the existing public utility, in the name of practicality, reliability, prior experience, expediency, and so forth.

On the topic of new entrants, a Hoover Institution study says, “entrants to the electricity sector provide a variety of services, sometimes in competition with utilities, but no sustainable roadmap has been developed for their role. The lack of … competitive services framework is slowing private investment…”

To quote the REV, “The question of who should serve as the DSPP is theoretically open to a choice between the incumbent utility and an independent entity.” Yet this option for an independent operator is not discussed in much depth or with seriousness.

Rather than explore novel organizational forms, the REV states, “… when the actual functioning of a DSPP is considered in a practical context, it is clear that incumbent distribution utilities should serve as DSPPs” [emphasis added, p. 24]. And further, “… even if the sources of power are distributed, the need for a single entity to be responsible for reliability of the overall system remains [emphasis added].” The proposal thus ends up augmenting the existing monopoly structure with broadened responsibilities.

A corollary is that the proposal discounts the competitive market’s role in coordinating resources, for reliability, resiliency, and more, among DER, macrogrid, and microgrids.

More Options Needed

The industry trend is for the grid to fracture, to break up into microgrids, or vertical and focused businesses, with distinct new topologies. Yes, centralized generation and the transmission network will remain, in a diminished role. Market forces, aided by light-touch regulations, may accomplish any needed coordination among resources without compromising the public interest.

The grid as we know it is unraveling. To complement NY State’s lead, will public utility commissions from other states, or some investor owned utilities, propose alternate, future-friendly solutions in the public interest that will engender multiple stakeholder support?

Interested in microgrids? Sign up for our Microgrid Executive MBA Training Course with author and professor Mahesh Bhave. In this course, you will learn to evaluate project economics of microgrid projects in a variety of markets using case studies, financial models, and templates. Find more information here.

15 Comments

Very good article. How is your DSPP concept different in a basic sense from the distribution component of the ERCOT model?

There is a very active argument about how the distribution component should be paid. In the ERCOT system the distribution company gets a fixed fee from each customer and a per kWh fee based on usage. I believe this is a disincentive for the distribution company to support EE. However, the system does directly correlate the size of the demand of the consumer with the distribution payment which is desirable. Perhaps consumers should be separated into levels of usage and fixed fees for distribution be determined for each level.

Nice article by Bhave. The smart grids and micro grids have come here to stay. In a country like India where I live reliable power supply is a distant dream for majority of the population. The governments are spending huge amounts for generation,transmission and distribution networks. All these methods are centralised plans involving big expenditures and long gestation periods. It is big source of corruption practises. The need of the hour is decentralisation of electric power generation and distribution. Roof top Solars,micro grids and smart grids along with suitable information technology can bring a sea-change like what cell phone has done to telecommunication in India. With an average of 300 sunny days of 8-10 hours per day, huge rural and semi urban population in need of reliable electric power , a combination of solar (roof top) with other renewables can provide sustainable green energy. Bold and innovative thinking coupled with dynamic action can turn energy starving country like India into energy surplus country without harming its environment.

ANONYMOUS
August 8, 2014

Lots of talk about disappearing grid and dislike of utilities but the Germans and others who are trying to make renewables work all conclude renewables imply massive growth of the grid and power systems. The central problem with renewable electricity is that there are no small-scale weekly to seasonal storage devices. The technologies that are capable of assuring electricity all year long all come in one size--very big and far exceeding any neighborhood microgrid. Real world, no technology on the horizon that eliminates the utility because of orbital mechanics of earth that creates seasons (except for those near the equator).

Waste to fuel electric power seems to be expensive enough that much of the cost must be charged to waste disposal to make the rest seem reasonable for electricity. EVs charged at home at night and in solar panel on poles topped parking lots by day should help better match supply and demand by time of day over course of day. Mr. Blevins seems to be describing something similar to the thing that looked and acted like a mini oil refinery that was news in 2004-2005. It helped a lot in cleaning up messes including getting mercury out of coal before burning the coal. But is was temperamental about changes in what was fed into it. So much so that it was almost necessary to either stick with one feedstock or pre-blend feed stocks to achieve a consistent mix over the course of a year.

"Community scale utilization of biomass and wastes as feedstocks for distributed power and biofuels production can be a reality."

Thank you, Mr. Blevins. Indeed waste, even just waste heat, can replace the Great Unreliables - wind and solar - for reliable power.

In Iceland, the Valhalla of geothermal power, the most potent source of energy on earth - Mother Earth herself - a remote hamlet uses a trash burner to warm tepid geothermal brines and advanced technology to get up to 3MW of power for the populace.

Q. Where on the surface of Planet Earth is such reliable baseload energy available?

Q L. Michael Homann:
Glad to see you mention both Buckminster Fuller and Hermann Scheer, who founded Eurosolar e.v. and who drafted the original German Renewable Energ act with the aide of Axel Berg, S.P.D.
I suggest you Google "Eurosolar e.v." and get its English site. One book from Eurosolar is "100 Renwable Now"- perhaps the best on the market.

"The Crystal" is a great permanent exhibition in London by Siemens- down at the Docklands which blends "sustainability" with architecture. Do check it out for any future designs you may be doing.

The magic words here are "CHANGE" & "UNCERTAINTY," neither of which go well with politics and long-standing utility monopolies. We're telling the utilities, "You know that thing you've been doing for almost a hundred years, that you've invested lots of time, money and commitment in? Well forget that- you have a new job description. Oh, by the way, nobody's ever had that job and we'll be making up the job description as we go. And you'll be in big trouble if you don't do your new job perfectly." The PUCs are equally uncomfortable with the new job and far too many of the politicians are ignorant opportunists, at least in the US. New York's "Reforming the Energy Vision," lame and biased though it may be, is at least a forward-looking step.

In the US at least, we seem to be dealing with "Conservative Panic." Conservatives, by their nature, don't like change, yet the modern world is changing very rapidly- socially, politically, economically, technically and I think the change is so extreme that conservatives can't deal with it rationally. Monopoly utilities are likewise conservative, so it's difficult for them to consider abandoning the business model that's made them money for many decades, in favor of something untried. Both these forces will probably combine to make it difficult to create the kinds of DSPP solutions that engineers like.

The term "control" in this sense is largely saying, "How can we make money out of this?" And usually myths need be created to steer thoughts in a specific direction in order to accomplish this goal. When we look at all the physical around us, we see that everything's nature is to seek equilibrium, to even out and share optimally. It is just man which is not happy with this rule, usually to his own disadvantage.

The monopolistic utilities (man's rule) is now confronted with distributed generation (nature's rule). The question is: Who will prevail? I think "man" is somewhat over optimistic about his chances.

The way I see energy's future, distributed micro generation will eventually form the core that makes up the micro grid, that makes up the national grid, and eventually ending up in maturity of a global connected renewable grid, where "control" will not be in the hands of a few, but be dispersed among many in a perfect equilibrium, with its dynamics regulated by smart technology, rendering it self sufficient in managing its own "control."

Upgrading and bettering the infrastructure will become only a service rendered by governments, and not be a money pool for a few.

The vector points straight in this direction, supported by the laws of nature, of which "man" has not set.

I parked in Downtown Boothbay Harbor over the weekend and went to lock up the car with the electronic lock and nothing happened. I assumed it was the battery, and asked my wife to use her 'key' Same thing. So I assumed it was the receptor in the door, and made a call to the distant dealer for a service appointment and used the manual key, thankful it was a new CROSSTREK with both manual and electronic keys.

Got home and decided to find out where the problem was in the car; or in the neighborhood. The search took me into the swamp of competing Radio Frequencies which cancel each other out; interfere with cell phone coverage; and when strong enough will prevent a key from locking/unlocking a vehicle.

I wouldn't say that the generation of all this RF 'noise' has become a dead zone and is akin to the evolution of individual power generation; but it's becoming a growing problem rendering electronic communication useless in certain spots and perhaps beyond the F.C.C. regulation and allocation of frequency ranges.

If you haven't, I suggest you assign a writer to research out this growing problem and the growth in 'dead zones' and who is responsible for trouble shooting them. This tower of babble has many antennas on it.

The Grid and the public energy sector will soon be under complete control of our liberal government. Indeed the purpose of the fraudulent theory of man-caused global warming; to facilitate the governmental take-over of the energy sector of our economy.
I am disappointed that the solar energy industry is so focused on feeding in to the Grid.
God has provided a perfect distribution system for the Sun's energy.
I consider that the Grid is an alternative to energy storage in batteries. Grid storage comes at a price. The electric company typically pays a low rate for the electricity purchased from a consumer/producer and charges a much higher rate when the consumer purchases power when the sun is not shining. Of course, this may be supplemented by subsidies and tax credits from the government.
But the highest price for tieing into the Grid is that you and your energy system will be soon be regulated and controlled by the government.
My designs are especially well suited for off-grid applications.
I do not intend to connect with Grid. I will use the electrolytic production of hydrogen for storage.
What will you do when the Grid goes down?

Bill, I understand your concerns...the point of microgrids is that in 10 years, you can site a home or business anywhere...no cables and wires connected to the outside world...giving us access to a lot of previously inaccessible home sites...now, water/sewage will be the only inhibitor of mass building off of the grid.
Don't want to be tracked? Don't buy a cell phone. It's that simple. But my electric company and water supplier know exactly how much product I use...and how much to charge me.

For nearly ten years now I made it my business (as an architect retired from practice) to learn about and understand that overused term Sustainability in relation to Energy. One thing I have become sure about, is that the ‘Holy Grid’ as it has become, has also become past its sell-by-date. No long dissertation here, of course, but some pointers only.
The answer, as usual, lies in the question, and those I chose to consider are in WHY I DO WHAT I DO, viz. http://cleanenergypundit.blogspot.co.uk/2014/04/why-some-haveasked-what-it-actually-is.html
My main inspiration comes from the incomparable Richard Buckminster Fuller (since 1963, with his admonition to the International Union of Architects in Paris), and Hermann Scheer, the German protagonist of solar energy and inventor of the Feed-in-Tariff. Buckminster Fuller’s legacy is his CRITICAL PATH of 1981, Hermann Scheer’s is his ENERGY IMPERATIVE of 2010 viz.
http://cleanenergypundit.blogspot.co.uk/2012/09/at-risk-of-boring-you-i-must-quote.html . Scheer’s long lecture at the Royal Institute of British Architects given in April 2008, is available at http://cleanenergypundit.blogspot.co.uk/2010/10/in-memoriam-hermann-scheer.html .
Given my chosen time scale of what may perhaps be found still sustainable by my grandchildren’s grandchildren, Aldous Huxley’s foreword to a later edition in 1946, of his BRAVE NEW WORLD of 1932 , quoted in http://cleanenergypundit.blogspot.co.uk/2014/06/tyger-spoors.html , is probably the direction of travel in thought and development.
A few of my musings on THE GRID are in http://cleanenergypundit.blogspot.co.uk/2012/11/truegrid-no-not-my-misspelling-title-of.html
...and on Civic Energy at
http://cleanenergypundit.blogspot.co.uk/2011/10/civic-energy-musings.html

Community scale utilization of biomass and wastes as feedstocks for distributed power and biofuels production can be a reality.
Somewhat like a multi-function food processor, a Kansas invention is in reality a multi-fuel and multi-process capable fuels processor, and Les Blevins is looking for a few backers and investors for his technology.
A blender or food processor is a kitchen appliance that one can use to produce results of their choice. Depending on what one puts into the blender and what button is pushed it can produce a nutritious drink made of veggies or a tastier ‘smoothie’ drink made of juice, fruits and yogurt.
The AAEC Sequential Grates fuels conversion technology is similar in concept in that its users (like towns or cities) can get varied results depending on what fuels are being processed and what fuel conversion/processing option is selected.
Like a food processor or blender; the AAEC Sequential Grates ™ fuels processing technology has an opening at the top and several operational choices for selecting the desired fuels conversion process and end products. Available fuel conversion processes run from clean coal combustion or gasification at one end of the scale, to advanced thermal biomass and waste conversion modes at the other end. End products available are cleaner heat, electric power, chemicals and biofuels.
Les Blevins believes the best way for keeping the cost of oil in line; and keeping a lid on carbon emissions from both power generation and transportation; may be to begin making more of our electric power and liquid and gaseous fuels by using our abundant biomass and wastes resources as feedstocks - along with abundant coal reserves - in distributed clean energy conversion systems based on AAEC’s novel new Sequential Grates ™ Diverse Fuels Conversion System Technology.
For more information on AAEC’s SG DFCS Technology ™ please contact;
Les Blevins, President
Advanced Alternative Energy
1207 N 1800 Rd. Lawrence, KS 66049
Ph: 785-842-1943
http://aaecorp.com/ceo.html

Hi: I would be careful about grandiosing todays communication, especially when including cell phones. Unless you live in the city or very flat areas, communication is 50/50 at best as to having your phone ring and quality does not even approach land lines. AT least a pay phone gave you a consistent connection. Cell phones are nothing more than an offshoot of broadcast VHF hand held devices, repeated across the land and switched for privacy, at least from the average person. Downsides include the effects of non-ionizing radiation increases in the past 50 years of 1 million fold, with all its effects on all life forms, and of course a huge cash cow for all the telcom companies, not to mention everyone is carrying around a personal tracker (Removed your battery from your I-pad lately). I am not suggesting that there are not upsides, but there are always prices to be paid... and only time will tell if it was worth it....

.....Bill

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Mahesh Bhave is a Visiting Professor of Strategy at Indian Institute of Management, Kozhikode, India since Fall 2010. His home is San Diego. He has worked in product management, strategy, and business development positions at Hughes, Sprint,...